UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended...............December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission file number 0-27206
SPACEHAB, Incorporated
1595 Spring Hill Road
Suite 360
Vienna, Virginia 22182
(703) 821-3000
Incorporated in the State of I.R.S. Employer
Washington Identification
No. 91-1273737
The number of shares of Common Stock outstanding as of the close of business on
February 5, 1998:
Class Number of Shares Outstanding
Common Stock 11,154,568
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARY
DECEMBER 31, 1997 QUARTERLY REPORT ON FORM 10-Q/A
TABLE OF CONTENTS
This Form 10-Q/A is being filed due to a clerical error reflected in the
unaudited condensed consolidated statement of operations for the three month
period ended December 31, 1997. The impact of this clerical error resulted in an
overstatement of net income for the three month period ended December 31, 1997
of $551,918, or $0.05 per share (basic EPS) and $0.04 per share (diluted EPS).
The net income amount reflected in the unaudited condensed consolidated
statement of operations for the six month period ended December 31, 1997 are
correct as previously filed.
PART 1 FINANCIAL INFORMATION Page
Item 1. Unaudited Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30,
1997 and December 31, 1997 3
Condensed Consolidated Statements of Operations for the
Three and Six months ended December 31, 1996 and 1997 4
Condensed Consolidated Statements of Cash Flows for the
Six months ended December 31, 1996 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
PART 1: FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
SPACEHAB, INCORPORATED AND SUBSIDIARY
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1997 1997
(audited) (unaudited)
-------------- --------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $12,886,731 $79,856,749
Receivables 5,176,255 8,091,539
Prepaid and other current assets 199,247 1,153,759
----------- -----------
Total current assets 18,262,233 89,102,047
Property, plant and equipment, net of
accumulated depreciation and amortization
of $38,115,620 and $40,683,502 90,961,873 96,244,607
Goodwill, net of accumulated amortization of
$55,947 and $143,780 3,394,773 3,306,940
Deferred mission costs 1,438,910 2,587,452
Other assets, net 392,587 5,655,712
----------- -----------
Total assets $114,450,376 $196,896,758
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable, current portion $ - $ 3,160,000
Loan payable under credit agreement,
current portion 500,000 500,000
Accounts payable and accrued expenses 2,408,111 3,295,089
Accrued consulting and subcontracting
services 9,052,308 4,441,844
Advanced billings 846,855 -
----------- -----------
Total current liabilities 12,807,274 11,396,933
Notes payable to shareholder 11,225,246 11,921,643
Loan payable under credit agreement, net of
current portion 1,500,000 1,000,000
Note payable, net of current portion - 10,253,074
Convertible notes payable - 63,250,000
Deferred flight revenue 2,295,898 12,313,949
----------- -----------
Total liabilities 27,828,418 110,135,599
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, authorized
30,000,000 shares, issued and outstanding
11,149,737 and 11,154,568 shares, 81,057,164 81,123,730
respectively
Additional paid-in capital 16,299 16,299
Accumulated earnings 5,548,495 5,621,130
----------- -----------
Total stockholders' equity 86,621,958 86,761,159
----------- -----------
Total liabilities and stockholders' equity $114,450,376 $196,896,758
============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARY
Unaudited Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Six Months
Ended December 31, Ended December 31,
----------------------- ------------------------
1996 1997 1996 1997
(as restated)
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue $22,992,176 $17,755,687 $23,105,418 $20,292,944
Costs of revenue:
Integration and operations 6,425,204 6,143,154 8,972,459 9,960,648
Depreciation 2,376,138 1,223,527 4,752,277 2,446,186
Insurance and other 106,250 552,979 106,250 752,019
----------- ---------- ----------- ----------
Total costs of revenue 8,907,592 7,919,660 13,830,986 13,158,853
----------- ---------- ----------- ----------
Gross profit 14,084,584 9,836,027 9,274,432 7,134,091
Operating expenses:
Marketing, general and
administrative 1,622,120 3,243,010 2,982,527 5,880,734
Research and development 314,564 759,768 314,564 1,051,577
---------- ---------- ---------- ----------
Total operating expenses 1,936,684 4,002,778 3,297,091 6,932,311
----------- ---------- ----------- ----------
Income from operations 12,147,900 5,833,249 5,977,341 201,780
Interest expense, net of capitalized
amounts (318,035) (1,175,542) (678,317) (1,378,335)
Interest and other income 459,665 1,147,529 814,574 1,409,880
Other expense - - 897,649 -
----------- ---------- ----------- ----------
Income before income taxes 12,289,530 5,805,236 5,215,949 233,325
Income tax expense 1,230,000 78,461 1,230,000 160,688
----------- ---------- ----------- ----------
Income before extraordinary item 11,059,530 5,726,775 3,985,949 72,637
Extraordinary item - gain on early
retirement of debt, net of taxes - - 3,274,029 -
----------- ---------- ----------- ----------
Net income $11,059,530 $5,726,775 $7,259,978 $72,637
=========== ========== =========== ==========
Basic earnings per share:
Income before extraordinary item $1.00 $0.51 $0.36 $0.01
Extraordinary item - - 0.30 -
----------- ---------- ----------- ----------
Net income per share $1.00 $0.51 $0.66 $0.01
=========== ========== =========== ==========
Shares used in computing net income
per share 11,111,997 11,149,789 11,091,443 11,148,830
=========== ========== =========== ==========
Diluted earnings per share:
Income before extraordinary item $0.99 $0.43 $0.36 $0.01
Extraordinary item - - 0.29 -
----------- ---------- ----------- ----------
Net income per share $0.99 $0.43 $0.65 $0.01
=========== ========== =========== ==========
Shares used in computing net income
per share - assuming dilution 11,146,236 15,034,271 11,147,737 11,401,426
=========== ========== =========== ==========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARY
Unaudited Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended December 31,
1996 1997
------------- -------------
Cash flows provided by (used for)
operating activities:
<S> <C> <C>
Net income $7,259,978 72,637
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,894,891 2,655,715
Gain on early retirement of debt,
net of taxes, before legal expenses (3,383,892) -
Amortization of financing fees - 134,085
Changes in assets and liabilities:
Increase in accounts receivable (1,600,992) (2,915,284)
Increase in prepaid and other
current assets (896,872) (954,512)
Increase in deferred mission costs (99,873) (1,148,542)
Increase in other assets (121,967) (1,574,973)
Increase (decrease) in deferred
flight revenue (4,598,576) 10,018,051
Increase (decrease) in accounts
payable and accrued expenses (2,232,186) 886,978
Increase in advanced billings - (846,855)
Decrease in accrued consulting
and subcontracting services (269,689) (692,606)
------------- --------------
Net cash provided by (used for)
operating activities (1,049,178) 5,634,694
------------- --------------
Cash flows used for investing activities:
Payments for modules under
construction (2,232) (8,339,226)
Payments for building under
construction - (2,046,419)
Purchase of property and equipment (2,000,414) (686,432)
------------- --------------
Net cash used for investing
activities (2,002,646) (11,072,077)
------------- --------------
Cash flows provided by (used for)
financing activities:
Payment of note payable to Insurers (3,185,060) (500,000)
Payment of debt placement fees - (3,822,239)
Proceeds from issuance of convertible
notes payable - 63,250,000
Payment of legal fees on early
retirement of debt (109,986) -
Proceeds from note payable - 13,413,074
Proceeds from issuance of common stock 24,000 66,566
----------- ------------
Net cash provided by (used for)
financing activities (3,271,046) 72,407,401
----------- ------------
Net increase (decrease) in cash
and cash equivalents (6,322,870) 66,970,018
Cash and cash equivalents at beginning
of period 50,795,548 12,886,731
------------- --------------
Cash and cash equivalents at end of
period $44,472,678 $79,856,749
============= ==============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
SPACEHAB, INCORPORATED AND SUBSIDIARY
Notes to Unaudited Condensed Consolidated Financial Statements
1. Basis of Presentation:
This Form 10-Q/A is being filed due to a clerical error reflected in the
unaudited condensed consolidated statement of operations for the three month
period ended December 31, 1997. The impact of this clerical error resulted in an
overstatement of net income for the three month period ended December 31, 1997
of $551,918, or $0.05 per share (basic EPS)and $0.04 per share (diluted EPS).
The net income amount reflected in the unaudited condensed consolidated
statement of operations for the six month period ended December 31, 1997 are
correct as previously filed.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the consolidated
financial position of SPACEHAB, Incorporated and subsidiary ("SPACEHAB" or the
"Company") as of December 31, 1997, and the results of their operations for the
three and six month periods ended December 31, 1996 and 1997 and their cash
flows for the six months ended December 31, 1996 and 1997. However, the
consolidated financial statements are unaudited, and do not include all related
footnote disclosures. The results of operations for the three and six months
ended December 31, 1997 are not necessarily indicative of the results that may
be expected for the full year. The Company's results of operations fluctuate
significantly from quarter to quarter. The interim unaudited condensed
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements appearing in the Company's
Form 10-K for the year ended June 30, 1997.
2. Earnings per Share:
In December 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share, which establishes new
guidelines for the calculations of earnings per share. Earnings per share for
all prior periods have been restated to reflect the provisions of this
Statement.
The following are reconciliations of the numerators and denominators of the
basic and diluted earnings per share computations for "income before
extraordinary item" and "extraordinary item" for the three and six month periods
ended December 31, 1997 and 1996, respectively: <TABLE> <CAPTION>
Three months ended Decembe 31, 1997 Three months ended December 31, 1996
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------ ------------- ----------
Basic EPS:
Income available to
<S> .................. <C> <C> <C> <C> <C> <C>
common stockholders $5,726,775 11,149,789 $ 0.51 $11,059,530 11,111,997 $ 1.00
Effect of dilutive
securities:
Convertible notes
payable ........... $ 797,063 3,626,446 -- -- -- --
Options and warrants -- 258,036 -- -- 34,239 --
---------- ---------- ----- ---------- ---------- ------
Diluted EPS:
Income available to
common stockholders $6,523,838 15,034,271 $ 0.43 $11,059,530 11,146,236 $ 0.99
========== ========== ====== =========== ========== ======
</TABLE>
<TABLE>
<CAPTION>
Six months ended December 31, 1997 Six months ended December 31, 1996
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------ ------------- ----------
Basic EPS:
Income before
<S> <C> <C> <C> <C> <C> <C>
extraordinary item $72,637 11,148,830 $0.01 $3,985,949 11,091,443 $0.36
Extraordinary -- -- -- $3,274,029 11,091,443 $0.30
Effect of dilutive
securities:
Convertible notes
payable -- -- -- -- 56,620 --
Options and warrants -- 252,596 -- -- 1,674 --
-------- ----------- ------ ----------- ----------- -----
Diluted EPS:
Income available to
common stockholders:
Income before
extraordinary item $72,637 11,401,426 $0.01 $3,985,949 11,147,737 $0.36
Extraordinary item -- -- -- $3,274,029 11,147,737 $0.29
</TABLE>
Convertible notes payable outstanding as of December 31, 1997, convertible into
4,642,202 shares of common stock at $13.625 per share and due October 2007, were
not included in the computation of diluted EPS for the six month period ended
December 31, 1997 as the inclusion of the converted notes would be
anti-dilutive.
Options and warrants to purchase 2,377,856 shares of common stock, at prices
ranging from $7.50 to $24.00 per share, were outstanding for the six months
ended December 31, 1996, but were not included in the computation of diluted EPS
because the options' and warrants' exercise prices were greater than the average
market price of the common shares during the six months ended December 31, 1996.
Similarly, additional options to purchase 50,000 shares of common stock at a
price of $7.00 per share were also not included in the diluted EPS calculation
for the three month period ended December 31, 1996. The options expire between
July 13, 1997 and April 15, 2005 and warrants expire between December 31, 1996
and June 21, 1998.
Options and warrants to purchase 1,161,560 shares of common stock, at prices
ranging from $11.00 to $14.88 per share, were outstanding for the three and six
month periods ended December 31, 1997, but were not included in the computation
of diluted EPS because the options' and warrants' exercise prices were greater
than the average market price of the common shares during the three and six
month periods ended December 31, 1997. The options expire between January 31,
1998 and October 21, 2004 and warrants expire between December 31, 1997 and June
21, 1998.
3. Depreciation of Flight Modules:
Effective July 1, 1997, the Company extended the estimated useful lives of its
space modules through 2012. This change in accounting estimate is treated
prospectively and is based on current available information from NASA, which has
estimated the life of the Space Shuttle program through at least 2012.
<PAGE>
4. Revenue Recognition:
Revenue is recognized upon completion of each module flight under the Mir
contract. Total contract revenue is allocated to each flight based on the amount
of services the Company provides on the flight relative to total services
provided for all flights under contract. Obligations associated with a specific
mission, e.g., integration services, are also recognized upon completion of the
mission. For new contract awards for which the capability to successfully
complete the contract can be reasonably assured and costs at completion can be
reliably estimated at contract inception, revenue recognition under the
percentage-of-completion method is being reported based on costs incurred on a
per mission basis over the period of the contract. The percentage of completion
method will result in the recognition of revenue over the period of contract
performance, thereby decreasing quarter by quarter fluctuations of reported
revenue. Revenue provided by the Astrotech payload processing facilities is
recognized ratably over the occupancy period of the satellites at the Astrotech
facilities.
5. Statements of Cash Flows - Supplemental Information:
(a) Cash paid for interest costs was $0.92 million and $0.68 million for the six
months ended December 31, 1997 and 1996, respectively. The Company capitalized
interest of approximately $0.83 million and $0.02 million during the six months
ended December 31, 1997 and 1996, respectively. (b) The Company paid $1.27
million and $1.40 million for income taxes during the six months ended December
31, 1997 and 1996, respectively.
6. New Credit Facilities:
On June 26, 1997, the Company entered into a $10.0 million line of credit
agreement with a financial institution. Outstanding balances on the line of
credit accrue interest at either the lender's prime rate or a LIBOR-based rate,
and are collateralized by certain assets of the Company. The term of the
agreement is through October 1999. As of December 31, 1997, the Company had not
drawn against the line of credit.
On July 14, 1997, the Company's wholly-owned subsidiary, Astrotech, entered into
a five year credit facility with a financial institution for loans of up to
$15.0 million. This loan is collateralized by the assets of Astrotech and
certain other assets of the Company, and is guaranteed by the Company. Interest
accrues at LIBOR plus three percent. Through December 31, 1997, the Company had
drawn $14.12 million against this loan. As of December 31, 1997, the outstanding
balance on this loan was $13.41 million.
In October 1997, the Company completed a private placement offering for $63.25
million of aggregate principal of 8% Convertible Subordinated Notes due 2007.
Interest is payable semi-annually. The notes are convertible into the common
stock of the Company at a rate of $13.625 per share. This offering provided the
Company with net proceeds of approximately $59.91 million to be used for capital
expenditures associated with the development and construction of space related
assets and for general corporate purposes.
7. Reclassifications:
Certain insignificant reclassification have been made to the Company's three-
and six-month periods ending December 31, 1997 to conform to the Company's
current financial statement presentation.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
This document may contain "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including (without limitation) the "General" and
"Liquidity and Capital Resources" sections of this Item 2. Such statements are
subject to certain risks and uncertainties, including those discussed herein,
which could cause actual results to differ materially from those projected in
such statements.
SPACEHAB was incorporated in 1984 to commercially develop space habitat
modules to operate in the cargo bay of the Space Shuttles.
The Company currently operates under two contracts with NASA, the Mir
Contract, with a total contract value of $90.2 million and the Research and
Logistics Module Services Contract, (the "REALMS Contract"), a $61.8 million
contract for two research missions on board the Space Shuttle and a logistics
mission to resupply the International Space Station. To date, the Company has
recognized $65.8 million of the Mir contract value, representing the completion
of the first five missions. The remaining $24.4 million represents the final two
Mir option missions scheduled to be flown during fiscal 1998. The aggregate
value of the newly awarded REALMS contract is $42.8 million for three firm
missions for NASA. The additional $19.0 million will be derived from three of
NASA's major International Space Station partners; the European Space Agency
(ESA), the National Space Development Agency of Japan (NASDA) and the Canadian
Space Agency (CSA). The Company has the potential to increase the total current
contract value of $61.8 million by approximately $22.0 million through module
usage sales to commercial customers for microgravity space research.
Additionally, the REALMS contract has an option for a fourth mission valued at a
minimum of $15.8 million. The first two of these missions are scheduled for
flights in the second quarter of fiscal 1999; the third is currently projected
for launch in May 2000.
SPACEHAB generates revenue by providing lockers and/or volume within the
SPACEHAB Modules, and by integration and operations support services provided to
scientists and researchers responsible for the experiments and/or by NASA or
International Agencies to carry logistics supplies for Module missions aboard
the Shuttle system. Under the Mir Contract, the Company recognizes revenue only
at the completion of each Space Shuttle mission utilizing Company assets.
Accordingly, the Company's quarterly revenue and profits have fluctuated
dramatically based on NASA's launch schedule and will continue to do so under
the Mir Contract and any other contract for which revenue is recognized only
upon completion of a mission. For the REALMS contract and for future contact
awards for which the capability to successfully complete the contract can be
demonstrated at contract inception, revenue recognition under the
percentage-of-completion method is being reported based on costs incurred on a
per mission basis over the period of the contract. The percentage-of-completion
method results in the recognition of revenue over the period of contract
performance, thereby decreasing the quarter-by-quarter fluctuations of reported
revenue.
Astrotech revenue is derived from various multiyear fixed price contracts
with satellite and launch vehicle manufacturers. The services and facilities
Astrotech provides to its customers support the final assembly, checkout and
countdown functions associated with preparing a satellite for launch. This
preparation includes: the final assembly and checkout of the satellite,
installation of the solid rocket motors, loading of the liquid propellant,
encapsulation of the satellite in the launch vehicle, transportation to the
launch pad and command and control of the satellite during pre-launch countdown.
Revenue provided by the Astrotech payload processing facilities is recognized
ratably over the occupancy period of the satellites in the Astrotech facilities.
Astrotech will recognize additional revenue from an exclusive multiyear
agreement to process all Sea Launch program payoads at the Boeing facility in
Long Beach, California.
The expenses associated with the operations of SPACEHAB are recorded based
on the type of expense. Costs of revenue include integration and operations
expenses associated with the performance of two types of efforts: (i) sustaining
engineering in support of all missions under a contract and (ii) mission
specific experiment support. Expenses associated with sustaining engineering are
expensed as incurred. Mission specific expenses relating to the Mir Contract are
recorded as assets and not expensed until the specific Space Shuttle mission is
flown and the related revenue is recognized. Other costs of revenue include
depreciation expense and costs associated with the Astrotech payload processing
facilities. Flight related insurance covering transportation of the SPACEHAB
Modules from SPACEHAB's payload processing facility to the Space Shuttle,
in-flight insurance and third-party liability insurance are also included in
costs of revenue and are expensed as incurred. Marketing, general and
administrative and interest and other expenses are recognized when incurred.
RESULTS OF OPERATIONS
For the three months ended December 31, 1997 as compared to the three months
ended December 31, 1996.
Revenue. The Company recorded revenue of approximately $17.76 and $22.99
million for the three months ended December 31, 1997 and 1996, respectively. In
accordance with the Company's revenue recognition policy for the Mir and the
Commercial Middeck Augmentation Module contract (the "CMAM" contract) Contracts,
revenue is recorded at the completion of a mission when the SPACEHAB modules are
returned to the Company. Revenue was recognized for the fifth Mir Contract
mission ($13.60 million) during the quarter ended December 31, 1997 in addition
to revenue generated from the REALMS Contract ($1.72 million) and from Astrotech
($2.43 million). In contrast, revenue for the quarter ended December 31, 1996
was derived from the CMAM Contract($7.96 million), the Mir Contract ($14.22
million) and the NASDA/ESA Contract ($0.81 million).
Costs of Revenue. Costs of revenue for the quarter ended December 31, 1997
decreased 11.09% to $7.92 million, as compared to $8.91 million for quarter
ended December 31, 1996. The primary components of costs of revenue for the
quarter ended December 31, 1997 include integration and operation costs under
the Mir Contract ($4.60 million), the REALMS Contract ($0.89 million), and the
NASDA/ESA Contract ($0.12 million); Astrotech operations ($0.84 million); and,
depreciation ($1.22 million). The primary components of costs of revenue for the
quarter ended December 31, 1996 included integration and operations costs under
the Mir Contract ($5.27 million), the NASDA/ESA Contract ($0.76 million) and the
CMAM Contract ($0.40 million); and, depreciation ($2.38 million). This decrease
in depreciation expense during 1997 is primarily attributable to the impact of
extending the estimated useful lives of the Company's modules. This change in
accounting estimate is treated prospectively and is based on current available
information from NASA, which extends the estimated useful life of the space
shuttle program to at least 2012.
Operating Expenses. Operating expenses increased approximately 106.68% to
approximately $4.00 million for the three months ended December 31, 1997 as
compared to approximately $1.94 million for the three months ended December 31,
1996. This increase is due primarily to the Company's efforts to increase staff,
adding strength in engineering, design and research and development capabilities
and reflects the additional costs of approximately $0.39 million incurred for
operating the Astrotech subsidiary.
Interest Expense. Interest expense was approximately $1.18 million for the
three months ended December 31, 1997 as compared to approximately $0.32 million
for the three months ended December 31, 1996. There was approximately $0.45
million and $0.02 million capitalized amounts for the quarter ended December 31,
1997 and 1996, respectively. Capitalized interest for the quarters ended
December 31, 1997 and 1996 was based on the construction of the Company's
science module with double module hardware, which will be placed in service
beginning in late 1999. Additional amounts were capitalized during the quarter
ended December 31, 1997 relating to the construction of an expanded facility for
Astrotech.
Interest and Other Income. Interest and other income was approximately $1.15
million and $0.46 million for the three months ended December 31, 1997 and 1996,
respectively. This increase is due to short term interest earned by the Company
for the investment of proceeds received from the Company's debt financings
completed during July and October 1997.
Net Income. Net income was approximately $5.73 million, or $0.51 per share
(basic EPS), for the quarter ended December 31, 1997, on 11,149,789 shares, as
compared to $11.06 million, or $1.00 per share (basic EPS), for the quarter
ended December 31, 1996, on 11,111,997 shares.
For the six months ended December 31, 1997 as compared to the six months
ended December 31, 1996.
Revenue. The Company recorded revenue of approximately $20.29 million and
$23.11 million for the six months ended December 31, 1997 and 1996,
respectively. Revenue recognized during the six months ended December 31, 1997
was from the Mir Contract ($13.60 million), REALMS Contract ($1.72 million) and
Astrotech ($4.97 million). Conversely, for the six months ended December 31,
1996 the Company's revenue was attributable to the Mir Contract ($14.22
million), CMAM Contract ($7.96 million) and NASDA/ESA Contract ($0.93 million).
Costs of Revenue. Costs of revenue for the six months ended December 31, 1997
decreased 4.86% to $13.16 million, as compared to $13.83 million for six months
ended December 31, 1996. The primary components of costs of revenue for the six
months ended December 31, 1997 include integration and operation costs under the
Mir Contract ($7.51 million), REALMS Contract ($0.93 million), and the NASDA/ESA
Contract ($0.20 million); Astrotech operations ($1.61 million); and,
depreciation ($2.45 million). In contrast, the primary components of costs of
revenue for the six months ended December 31, 1996 included integration and
operations costs under the Mir Contract ($7.17 million), the NASDA/ESA Contract
($0.85 million) and the CMAM Contract ($1.06 million); and, depreciation ($4.75
million). This decrease in depreciation expense is attributable to the impact of
extending the estimated useful lives of the Company's modules. This change in
accounting estimate is treated prospectively and is based on current available
information from NASA, which extends the estimated useful life of the Space
Shuttle program to at least 2012.
Operating Expenses. Operating expenses increased by approximately 110.26% to
approximately $6.93 million for the six months ended December 31, 1997 as
compared to approximately $3.30 million for the six months ended December 31,
1996. This increase is due primarily to the Company's efforts to increase staff,
adding strength in engineering, design and research and development capabilities
and reflects the additional costs of approximately $0.67 million for operating
the Astrotech subsidiary.
Interest Expense. Interest expense was approximately $1.38 million for the
six months ended December 31, 1997 as compared to approximately $0.68 million
for the six months ended December 31, 1996. There was approximately $0.83
million and $0.02 capitalized interest amounts for the six months ended December
31, 1997 and 1996, respectively. Interest was capitalized based on the
construction of the Company's science module with double module hardware during
the six months ended December 31, 1997 and 1996, however, additional amounts
were capitalized in 1997 for costs incurred on the construction of an expanded
facility for Astrotech.
Interest and Other Income. Interest and other income was approximately $1.41
million and $0.81 million for the six months ended December 31, 1997 and 1996,
respectively. This increase is due to short-term interest earned by the Company
for the investment of proceeds received from the Company's credit facilities.
Net Income/Loss. Net income was approximately $0.07 million, or $0.01 per
share (basic and diluted EPS), on 11,148,830 shares (basic EPS) as compared to
$7.26 million, or $0.66 per share (basic EPS), for the six months ended December
31, 1996, on 11,091,443 shares.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Capital Resources
The Company has historically financed its capital expenditures, research and
development and working capital requirements with progress payments under its
contracts, including the CMAM Contract, the Mir Contract, the NASDA/ESA
Contracts and Astrotech's operations, as well as with proceeds received from
private equity offerings and borrowings under credit facilities. During December
1995, SPACEHAB completed an initial public offering of common stock (the
"Offering"), which provided the Company with net proceeds of approximately
$43.48 million. In June 1997, the Company signed an agreement with a financial
institution securing a $10.0 million revolving line of credit (the "Revolving
Line of Credit") that the Company may use for working capital purposes. As of
December 31, 1997, no amounts were drawn on this line of credit. In July 1997,
Astrotech obtained a five-year term loan (the "Term Loan Agreement"), which is
guaranteed by SPACEHAB, and provides for draws of up to $15.0 million for
general corporate purposes. Through December 31, 1997, the Company had drawn
$14.12 million on this loan and had an outstanding balance on that date of
$13.41 million. Further, on October 21, 1997 the Company completed a private
placement offering of convertible subordinated notes (the "Notes Offering"),
which provided the Company with net proceeds of approximately $59.91 million to
be used for capital expenditures associated with the development and
construction of space related assets and for general corporate purposes.
Cash Flows from Operating Activities. Cash flows provided by (used for)
operating activities for the six months ended December 31, 1997 and 1996, were
$5.63 million and ($1.05) million respectively. The increase in cash flows
provided by operating activities is due to a variety of offsetting factors. The
most significant factor of this increase is deferred flight revenue, which
reflects billing during the six months ended December 31, 1997 for the option
missions under the Mir contract and the REALMS contract.
Cash Flows from Investing Activities. For the six months ended December 31,
1997 and 1996, cash flows used for investing activities consisted of capital
expenditures of approximately $11.07 million and $2.00 million, respectively. Of
this amount, $4.42 million of the expenditures in the current year are
attributable to the construction of the Company's science module with double
module hardware, which module is to be completed in early 1999. The Company
anticipates that it will spend between $35.0 million and $38.0 million in total
on the asset. As of December 31, 1997, the Company has spent approximately
$18.19 million on this asset. In addition, the Company has spent approximately
$2.05 million for the construction of an expanded facility for Astrotech.
Cash Flows from Financing Activities. Cash flows provided by (used for)
financing activities were approximately $72.41 million and ($3.27) million for
the six months ended December 31, 1997 and 1996, respectively. During the six
months ended December 31, 1997, the Company received net proceeds of
approximately $13.41 million under the Term Loan Agreement. In August 1997, the
Company also made the first payment of $0.50 million under the Credit Agreement.
In October 1997, the Company received net proceeds of approximately $59.91
million by completing an offering of $55.00 million of its 8% Convertible
Subordinated Notes due 2007 as well as exercise of the underwriters'
over-allotment for an additional $8.25 million.
The Company believes that cash flows from the Notes Offering, the Term Loan
Agreement, the Revolving Line of Credit and other current financing activities
will be sufficient to meet any cash flow requirements from operations and other
funding requirements for capital asset construction and development for at least
the next twelve months.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
( a ) The Annual meeting was held on October 21, 1997.
( b ) The existing Board of Directors stood for and were duly
reelected at this Annual Meeting.
The names of the directors are as follows:
Hironori Aihara
Robert A. Citron
Dr. Edward E. David, Jr.
Dr. Shelley Harrison
Dr. Shi H. Huang
Chester M. Lee
Gordon S. Macklin
Dr. Brad M. Meslin
Dr. Udo Pollvogt
Alvin L. Reeser
James R. Tompson
Prof. Ernesto Vallerani
( c ) The following matters were brought to a vote of the shareholders
at the meeting:
1. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for fiscal year 1998.
For 7,180,750 Against 1,105 Abstain 3,699
2. To approve the amendments to the Company's 1994 Stock Incentive Plan to
increase the total number of shares reserved and available for distribution
under the Plan to 2,750,000. For 2,896,691 Against 1,799,888 Abstain 13,040
3. To adopt the Company's 1997 Employee Stock Purchase Plan.
For 3,156,386 Against 1,540,226 Abstain 13,007
4. To approve the amendments to the Company's 1995 Directors Stock Option Plan
to increase the total number of shares reserved and available for distribution
under the Plan to 500,000. For 3,916,733 Against 1,311,137 Abstain 15,048
All four items presented to the shareholders were approved and implemented.
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits. The separate Index to Exhibits accompanying this filing is
incorporated herein by reference.
(b) Reports on Form 8-K.
1. Report on Form 8-K filed on October 29, 1997 disclosing the
Registrant's completion of an offering of $55 million of its 8%
Convertible Subordinated Notes due 2007 and the closing on an
over-allotment option for an additional $8.250 million of its 8%
Convertible Subordinated Notes due 2007.
2. Report on Form 8-K filed on January 21, 1998 disclosing the
Registrant's retirement of Chester M. Lee as president and
appointment of David A. Rossi, current senior Vice President of
Business Development, to president, effective on January 14, 1998.
Exhibit No. Description of Exhibits
10.1* ESA Contract, dated October 10, 1997, between the Registrant
and INTOSPACE GmbH (the "ESA Contract").
10.2*** NAS 97-199, dated December 21, 1997, between the Registrant
and NASA (the "REALMS Contract").
10.3*** Letter Contract Number SHB 1014, dated August 13, 1997,
between the Registrant and McDonnell Douglas
Aerospace-Huntsville, (as amended).
10.4*** Employment Agreement and Non-Interference Agreement dated
January 15, 1998, between the Company and Chester M. Lee.
10.5*** Employment Agreement and Non-Interference Agreement dated
January 15, 1998, between the Company and David A. Rossi.
10.6*** Amendment number 1 to Employment Agreement and
Non-Interference Agreement dated April 1, 1997, between the
Company and Shelley A. Harrison.
10.7*** Amendment number 1 to Loan and Security Agreement dated
December 31, 1997, between the Company and First Union
National Bank.
11. Statement regarding Computation of Earnings Per Common Share.
21.** Subsidiary of the Registrant
27 Financial Data Schedule
* Incorporated by reference to the Registrant's Form 10-Q for the
quarter ended September 30, 1997 filed with the Securities and
Exchange Commission on November 6, 1997.
** Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended June 30, 1997 filed with the Securities and
Exchange Commission on September 12, 1997.
*** Incorporated by reference to the Registrant's Form 10-Q for the
quarter ended December 31, 1997 filed with the Securities and
Exchange Commission on February 6, 1998.
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPACEHAB, INCORPORATED
Date: June 19, 1998 /S/ MARGARET E. GRAYSON
----------------------------------
Margaret E. Grayson
Vice President of Finance (CFO)
Treasurer, and Assistant
Secretary
(Principal Financial and
Accounting
Officer)
Exhibit 11
SPACEHAB, INCORPORATED AND SUBSIDIARY
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Six Months
Ended December 31, Ended December 31,
1996 1997 1996 1997
----------- ----------- ----------- -----------
Net Income and Adjusted Earnings:
Net income applicable to common
shareholders used for basic
<S> <C> <C> <C> <C>
computations $11,059,530 $5,726,775 $7,259,978 $72,637
----------- ----------- ----------- -----------
Dilution adjustments:
Savings in convertible note
payable interest expense
net of tax - 797,063 - 797,063
----------- ----------- ----------- -----------
Adjusted net income applicable
to common shareholders assuming
dilution $11,059,530 $6,523,838 $7,259,978 $869,700
=========== =========== =========== ===========
Average number of shares of common
stock used for basic computation 11,111,997 11,149,789 11,091,443 11,148,830
----------- ----------- ----------- -----------
Diluted adjustments (1):
Weighted Average Shares and
Share Equivalents Outstanding:
Assumed exercise of options and
warrants - 258,036 1,674 252,596
Assumed conversion of
convertible debt 34,239 3,626,446 54,620 1,813,223
----------- ----------- ----------- -----------
Total number of shares assumed to be
outstanding assuming dilution 11,146,236 15,034,271 11,147,737 13,215,581
----------- ----------- ----------- -----------
Earnings Common Per Share:
Income per common share:
Income before extraordinary item $1.00 $0.51 $0.36 $0.01
Extraordinary item - - 0.30 -
=========== =========== =========== ===========
Basic $1.00 $0.51 $0.66 $0.01
=========== =========== =========== ===========
Income before extraordinary item $0.99 $0.43 $0.36 $0.07
Extraordinary item - - 0.29 -
----------- ----------- ----------- -----------
Diluted (1): $0.99 $0.43 $0.65 $0.07
=========== =========== =========== ===========
</TABLE>
(1) The assumed exercise of options and warrants and the conversion of
convertible debt is anti-dilutive but are included in the calculation of
dilutive earnings per share in accordance with Regulation S-K Item 601
(a)(11).
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001001907
<NAME> SPACEHAB, Inc.
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Jun-30-1998
<PERIOD-START> Oct-01-1997
<PERIOD-END> Dec-31-1997
<CASH> 79,856,749
<SECURITIES> 0
<RECEIVABLES> 8,091,539
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 89,102,047
<PP&E> 96,244,607
<DEPRECIATION> 40,683,502
<TOTAL-ASSETS> 196,896,758
<CURRENT-LIABILITIES> 11,396,933
<BONDS> 0
0
0
<COMMON> 81,123,730
<OTHER-SE> 16,299
<TOTAL-LIABILITY-AND-EQUITY> 196,896,758
<SALES> 17,755,687
<TOTAL-REVENUES> 17,755,687
<CGS> 7,919,660
<TOTAL-COSTS> 11,950,451
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,175,542
<INCOME-PRETAX> 5,805,236
<INCOME-TAX> 78,461
<INCOME-CONTINUING> 5,726,775
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,726,775
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.43
</TABLE>
